July 1 (Bloomberg) -- South Africa’s rand strengthened for a seventh day before a report that will probably show the slowdown in factory orders eased for a second month in June, signaling the worst in the production decline may be over.

The rand gained as much as 0.5 percent to 7.7050 per dollar and traded 0.3 percent stronger at 7.7220 by 9:20 a.m. in Johannesburg, from 7.7452 yesterday. Against the euro it appreciated 0.2 percent to 10.8576.

South Africa’s purchasing managers’ index is expected to rise for a second consecutive month, climbing to 39.3 in June, from 37.3 the previous month, according to the median estimate of four economists surveyed by Bloomberg. The index, which reached a low of 35.6 in April, will be released by Kagiso Securities Ltd. at 11 a.m.

“We believe the rand will maintain its firmer bias,” said Michael Keenan, a currency strategist at Standard Bank Group Ltd. in Johannesburg. The currency may rally to 7.55 per dollar today “especially if the PMI data surprises to the upside and encourages expectations for a bottoming in the manufacturing sector’s slump.”

Manufacturers including ArcelorMittal South Africa Ltd., Africa’s biggest steelmaker, and Sappi Ltd., the world’s largest maker of glossy magazine paper, have scaled back output and fired workers as a global recession slashed export demand. Factory output, which makes up about 15 percent of South Africa’s economy, slumped a record 21.6 percent in April.

South Africa’s currency has rallied more than 23 percent against the dollar this year as interest rates of 0.25 percent in the U.S. and 0.1 percent in Japan stoked demand for the nation’s higher-yielding assets.

Government bonds were steady, with the benchmark 13.5 percent security due September 2015 yielding 8.47 percent, unchanged from yesterday’s close. Yields move inversely to bond prices.

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net

Last Updated: July 1, 2009 04:19 EDT